Archive for April, 2012

JCP payroll reductions…will they be enough?

The hot topic among retail observers continues to be the “reinvention” of JCPenney by its new management team. The latest news — announced, unfortunately, just before the Easter holiday — concerned massive layouts at JCP stores, headquarters and one of its call centers. My ongoing point of view about the JCP evolution: It needs to drive more sales, not fewer sales, to be judged a success over the long term. Here’s my latest RetailWire blog post on the subject:

It’s been clear since the analyst presentation in late January (laying out JCP’s new strategic course) that the payroll reductions were destined to happen. (In fact, the writing was probably on the wall for the past six months in the Plano headquarters…with a lot of people uncertain whether they would survive the process or not.) Ron Johnson and his leadership team made it clear that JCP would need to reduce SG&A to 30% of sales in order to be more competitive and profitable.

Here’s the problem: Some observers have concluded that JCP sales are falling faster than expected. (Nobody will know what the Q1 comps look like until early May.) It’s possible that the first $900 million in expense reductions — HQ and store payroll as well as marketing — may not get JCP to the expense number promised to analysts by 2013. And many of the initiatives promised at the “new” JCP (such as Town Square) are potentially quite labor-intensive.

Bottom line: It pays for the JCP team — at headquarters and in the field — to understand clearly that the first wave of cost cutting may not be the last. (And investors will be typically impatient for results.) Since the “reinvention” of JCP is positioned as a four-year project, it will make a fascinating case study years from now to find out whether this bold experiment has actually worked.

Retailer/vendor collaboration: What’s the roadblock?

An interesting RetailWire discussion recently about some of the disconnects between retailers and suppliers continuing to prevent them from seeing eye-to-eye about driving profitable sales. One of the most interesting findings is the high importance of “strategic thinking” among suppliers, less so among retailers. Here’s my point of view:

As far as collaborative planning between retailers and vendors has moved in the past decade, there is still a disconnect. (See the gap in rankings of “strategic thinking” between retailers and suppliers.) There may never be a complete meeting of the minds, but there is plenty of opportunity for both sides to recognize mutual interest and gain. The distrustful, adversarial relationships of the past need to become “history”…especially as industry consolidation on both sides of the table becomes a fact of life.

SKU rationalization: The Costco approach

From a recent RetailWire discussion about Costco and its approach to keeping assortments narrow:

SKU rationalization can be carried too far: Just look at Walmart’s experience a few years ago when it reduced its SKU count so dramatically that it lost sales along with its competitive edge. But in Costco’s case, the idea of “doing less better” makes perfect sense. Regular shoppers still perceive plenty of choices inside a Costco store, but not to the point where it makes the store difficult to navigate. And Costco’s commitment to fresh assortments — not just in food but throughout the store — keeps consumers coming back with more frequency, despite the bulk packaging found throughout the store.

Safeway tries targeted couponing

I don’t usually comment on food retailing on RetailWire, but I did weigh in recently on a new promotional tactic by Safeway. It is planning to shift its emphasis from coupons aimed at its entire customer base to more targeted efforts built on consumer preferences. Its frequent shoppers will receive more point-of-sale offers useful on their next visit toward products that they actually like to buy. I think more retailers (food and non-food) can learn from this approach if they apply the necessary technology:

Using a rifle instead of a shotgun for more promotional messages is a smart move by Safeway — and would be a smart move for other retailers, whether they sell food or other categories. If there is a lesson learned from the ongoing success of Amazon (beyond assortment and price), it’s the use of technology to tailor promotional offers and new product introductions to specific consumer tastes. (And “deal of the day” sites are still a step behind in developing more targeted offers.) Safeway deserves praise for moving forward on a more targeted, interactive and potentially cost-efficient way to drive more sales.